Social Security and Safety Nets in India

Dr. Tarun Das1

Economic Adviser, Ministry of Finance

1. Social Security and Safety Nets

(a) Protective safety nets

In India, positive discrimination in favour of the scheduled castes (SCs).

Scheduled Tribes (STs) and Other Backward Classes (OBCs), minority
ethnic groups women etc. as an instrument of social justice has been heritage
of the liberation struggle and a constitutional obligation endorsed by judicial
sanctions. Social security has been listed in the Concurrent List of the
Constitution signifying the responsibility of both the Centre and the States in
this sphere. The task of providing meaningful social security continues to be
challenging in view of financial as well as operational constraints, high
incidence of poverty, unemployment, illiteracy and the large size of labour
force in the unorganised and informal sector.

The permanent social security benefits provided through legislative measures

like Minimum Wages Act, Industrial Disputes Act, Workmen’s
Compensation Act, Employees State Insurance Act, Employees Provident
Fund & Miscellaneous Provisions Act, Maternity Benefit Act, and P payment
of Gratuity Act, etc. cater to mainly organised urban labour comprising less
than 10 per cent of the total labour force. Most of the states/UTs, have
pension schemes for the old and disabled, but due to eligibility criteria of
income and age, only 9 percent of old-age population gets the benefit of
pension. Most of the States have also implemented the Minimum Wages Act,
but the levels of minimum wages and coverage vary from state to state. Some
special employment programmes are also being implemented by some state
governments like the Employment Guarantee Scheme in Maharashtra and the
self-employment Scheme for Registered Unemployed in West Bengal.

Immediately after the independence, the Government enacted the Industrial

Dispute Act (IDA), 1947 for protection of workers. IDA permits lay-off,
1
Prepared for the United Nations Economic and Social Commission for Asia and Pacific (UN-
ESCAP) as inputs for the ESCAP Survey for 1998.

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retrenchment and closure in all undertakings, which do not employ more than
100 workers. In the case of larger units, as per the Act, no retrenchment, lay-
off or closure is allowed without taking prior permission from the
government and the affected workers not being served at least three months’
notice in writing indicating reasons for such actions.

In addition, in order to mitigate the possible adverse impact of economic

reforms, a National Renewal Fund (NRF) has been established to fund
schemes for compensation, retraining and redeployment of workers affected
by restructuring. The NRF is being financed partly by disinvestment of
government equity in public enterprises and partly by contributions made by
the World Bank and individual country donors. Since its inception in 1992
the Fund has financed the voluntary retirement of 90000 workers who have
opted for voluntary retirement.

Some important initiatives taken over the years to improve the well-
being of the weaker sections like the scheduled castes, as well as Other
Backward Classes include: (I) Reservation of jobs to the extent of 22 per
cent for SCs/STs in both public and private sectors, (ii) Reservation of 27 per
cent of jobs for Other Backward Classes (OBCs) in the Central Government
and Public Sector Undertakings, excluding the creamy layer. (iii)Setting up a
National Commission for Backward Classes, (iv) A scheme for education
complexes in low literacy pockets for improving literacy among tribal
women, (v) setting up of a National Backward Classes Finance and
Development Corporation to promote economic and other development
activities of the backward classes. (vi) Raising of the share capital of the
National Scheduled Castes and Scheduled Tribes Finance Development
Corporation. (vii) Providing rice and wheat to the tribal dominated areas at
concessional prices even lower than the public distribution prices.. (viii)
Special Component Plan for Scheduled Castes and Integrated Tribal
Development Projects in selected states, (ix) Establishment of the Tribal
Cooperative Marketing Development Federation, and (x) Indira Awaas
Yojona and Million Wells Scheme to provide houses free of cost to persons
belonging to SC/STs and bonded laborers.

(b) Other social security schemes

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A Minimum Needs Programme (MNP) was introduced in the fifth five year
plan (1974-1979) with the objective of establishing a network of basic
services and facilities of social consumption in all areas up to nationally
accepted norms with particular concern to meet the needs of those who
cannot command them in the market. The minimum needs programmed
covers elementary education; adult education, rural health, rural water
supply and sanitation, rural roads, rural electrification, rural housing public
distribution system, nutrition environmental improvement of urban slums
and infrastructure for poor.

In the last few years, group insurance schemes for landless agricultural
labourers, life insurance scheme for integrated Rural Development
Programme (IRDP) beneficiaries and group insurance for certain categories
of workers belonging to weaker sections of a the society have been
introduced. Commercial banks are required to lend at least 40 per cent of
their total credits towards the priority sectors consisting of small scale
industries, agriculture, retail trade, small transport operators etc. Banks also
provide loans at concessional interest rates to the weaker sections of the
society, minority communities and persons affected by natural calamities,
riots, disturbances etc.

All insurance companies, both life and general, are wholly

nationalised. Insurance companies play a major role for providing social
security in the form of various schemes such as insurance afro life floods,
fire, earthquakes, riots, war risks, accidents etc. In recent years, they have
introduced several special schemes such as Medi-claim Policy,
Comprehensive Crop Insurance Scheme, Social Security Scheme for Poor
Families in the age group of 18-60 (to provide personal accident insurance),
Hut Insurance Scheme for Poor families in rural areas (to provide fire
insurance cover afro huts and belongings of landless labourers), Railway
passengers Insurance Scheme (to cover cases of deaths and injuries to bona
fide passengers on account of terrorist attacks, bomb blasts etc.), Professional
Indemnity Insurance, Teakwood Insurance, Tea Plantation Insurance etc. A
Social Security Fund has been set up with contributions from the
Government and the Life Insurance Corporation for the purpose of providing
social security through group insurance on the lives of persons forming part
of weaker and vulnerable sections of the society.

Women and children deserve special and supplementary support in

general development programmes. The Integrated Child Development

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services (ICDS) programme seeks to ensure children in the age group 0-6
years and the expectant and nursing mothers, a package of services
comprising health check-ups, immunization, referral services, supplementary
feeding, nutrition education for mothers. Special Nutrition Programme (SNP)
provides supplementary food to the children. Special mid-day meal schemes
are also being implemented in certain states. Besides the ICDS, programmes
like Early Childhood Education (ECE) and Balwadi Nutrition Programme
(BNP) are contributing to children’s development. They have also been
accorded priority in National Nutrition Policy (1993).

In recent years, some special initiatives have been taken for

development and welfare of women. The National Commission for Women
set up in 1992, has a comprehensive mandate to study and monitor matters
relating to constitutional and legal safeguards for women, and to look into
complaints involving deprivation of their rights.

(c) Promotive safety nets

Poverty alleviation has been a primary objective of our planning since

its inception in 1951 and several anti-poverty measures have been in
operation focussing the poor as the target groups. The Government has
introduced in recent years various special employment programmes like the
National Rural Employment Programme, Integrated Rural Development
Programme, Urban Micro Enterprises Scheme, Urban Wage Employment,
Urban Housing Shelter Upgradation Scheme. Self Employment Scheme for
urban poor (SEUP), self employment for educated unemployed Youth
(SEEUY) to generate additional employment. In 1989 a new employment
generation programme called the Jawahar Yojona (JRY) was launched to
effectively implement the existing employment programmes. An
Employment Guarantee Scheme for the drought-prone area has also been in
operation since 1990.

In view of the fact that the educated unemployment constitutes more

than 40 per cent of unemployed and the growth of salaried jobs in the public
and organised sectors are limited, special efforts are being taken to develop
institutional mechanisms and support systems for promotion of self-
employment among the educated.

(d) The role of non-governmental organisations

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 Over the years government has taken initiatives to involve
voluntary agencies while preparing and implementing some of its schemes on
social welfare such as rural development, slum development, waste and hill
development food for work programme, primary health care etc. Various
non-governmental organisations (NGOs) and cooperatives are also
participating on their own in community services. NGOs and religious
organisations have established hospitals, schools, sodality houses, and rest
houses, orphans homes and provide various welfare measures to the poor,
disabled and weaker sections of the society. Many international agencies like
Oxfam, Ramakrishna Mission, The Mother Missionary Home, Young Men’s
Christian Association (YMCA), Young Women’s Christian Association
(YWCA), Mother Teresha Missionaires etc. are providing a wide range of
social services.

(e) Poverty Alleviation Measures

India’s anti-poverty strategy comprises of a wide range of poverty

alleviation and employment generation programmes many of which have
been in operation for several years and have been strengthened to generate
more employment, create productive assets, impart technical and
entrepreneurial skills and raise the income level of the poor. These
programmes include the following:

(i) The National Social Assistance Programme is a centrally sponsored

scheme with 100 per cent Central funding to the States and Union
Territories for providing social assistance to the poor households in
the case of old age, maternity, and death of sole bread earner.
(ii) Integrated Rural Development Programme (IRDP) aims at providing
income-generating assets to identified families below the poverty line
through a mix of credit and subsidy to enable them to improve heir
levels of living and eventually to cross the poverty line.
(iii) (Targeted) Public Distributed System (PDS) provides foodgrains to
the poor households at subsidised prices, which are even lower than
the subsidised prices of foodgrains supplied to the other households.
(iv) Employment Assurance Scheme (EAS) aims at creating economic
infrastructure and community assets for sustained employment for at
least 100 days of unskilled manual labour in poor rural households.
(v) Nehru Rozgar Yojana (NRY- Nehru Employment Scheme) aims at
providing employment opportunities for the urban poor under three

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 components comprising wage employment, micro-enterprises and
shelter upgradation for the urban poor.
(vi) Jawahar Rozgar Yojana (JRY- Jawarlal Employment Programme)
aims at generating additional gainful employment for the under-
employed in rural areas, strengthening rural infrastructure and assets
and improving the overall quality of rural life. JRY had been
restructured since 1996, and the Indira Awas Yojana (Indira
Housing Programme) and Million Wells Scheme, which were
earlier sub-schemes under the JRY, had become separate programmes
since 1996.
(vii) Prime Minister’s Rozgar Yojana (PMRY) for providing self-
employment to educated youth has been designed to provide
employment to more than a million persons by setting up 0.7 million
enterprises. As many as 0.82 million had already been sanctioned
during the eighth plan, and a target of 1 million beneficiaries has been
fixed for the Ninth Plan (1997-2002). The existing self-employment
Scheme for Educated Unemployed Youth (SEEUY) has been
subsumed under PMRY.
(viii) Integrated Child Development Services provides an integrated
package of services comprising supplementary nutrition, health,
immunisation, health check-up and referral services, pre-school non-
formal education and health to children below six years.
(ix) Indira Awas Yojana aims at providing housing units free of cost to
the members of the scheduled casts and scheduled tribes and free
bonded labour below the poverty line.
(x) Million Wells Scheme in funded by the Centre and the States in the
ratio of 80:20 to provide open irrigation wells free of cost to poor,
small and marginal farmers belonging to the Schedules Castes and
Schedules Tribes and free bonded labour.
(xi) Rural Water Supply and Sanitation Programmes – various schemes
are being implemented by the States and local governments under the
Minimum Needs Programme to supply drinking water and to improve
sanitation in rural areas and urban slums.
(xii) Prime Minister’s Integrated Urban Poverty Eradication Programme
(PMIUPEP) envisages a holistic approach to urban poverty
eradication by creating a facilitating environment for significant
improvement in the quality of life of the urban poor.
(xiii) Training of Rural Youth for Self-Employment (TRYSEM) aims at
upgrading the skill of the rural youth from the target group of families
so as to enable them to take up self and wage employment.

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(xiv) The Scheme of Development of Women and Children in Rural
Areas aims at improving the socio-economic status of the poor
women in the rural areas through creation of opportunities for income
generating activities on a self-sustaining basis. The programme is at
present being funded by the Centre and States on 50:50 basis.
(xv) Ganga Kalyan Yojana is a centrally sponsored scheme launched in all
districts since 1997 to provide irrigation through exploitation of
ground water (bore wells and tube wells) to individuals and groups of
beneficiaries belonging to the target groups i.e. small and marginal
farmers below the poverty line.
(xvi) The Swarna Jawanti Shahari Rozgar Yojana (SJSRY- the Silver
Jubilee Commemorative Employment Scheme) which came into
operation since December 1997 seeks to provide gainful employment
to the urban unemployed or under-employed poor through the setting
up self-employment ventures or provision of wage employment. The
Centre and the States fund it on a 75:25 basis. The scheme replaced
the earlier Urban Basic Services Programme, Nehru Rozgar Yojana
(NRY) and the PMIUPEP by two special schemes viz. The Urban
Self-Employment Programme and the Urban Wage Employment
Programme.
(xvii) Rashtriya Mahila Kosh is a national programme for extending credit
to the poor women in the informal sector. The Mahila Samridhi
Yojana aims to promote thrift among rural women and to empower
them with control over their household assets. Balika Samridhi
Yojana provides a grant of Rs.500 to the mother of a new born girl
child in a family below the poverty line in rural and urban areas.
(xviii) Minimum Needs Programme – Under the scheme the states provides
seven basic minimum services viz. Safe drinking water, primary
education, primary health, housing, mid-day meals for primary school
children, rural roads and strengthening public distribution system.
Since 1996 a central assistance is also being provided to the states to
meet a part of the expenditure under the scheme.

(f) Assessment and policy prescriptions

The expenditure on social security in India hardly accounts for 2.5 per
cent of GDP. This is among the lowest in the world. Most of the social
security benefits from the meager allocation accrue to the well organised

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urban work force who account afro less than 10 per cent of the total labour
force, However, there is now a growing realization among the states and the
Centre about the needs to provide adequate social security to the rural and
unorganised labour. A wide variety of social security schemes for rural
labour as mentioned above are currently in operation in different states,
although the coverage and scale of assistance are far from being adequate.

Merging the various wage employment schemes being run by the

Centre and state governments should launch a massive Employment
Guarantee Programme for rural labour. The works under this programme
should be used for improving productivity and creating rural assets. Works
should be closely integrated with other area planning programmes, and
sectoral development programmes. In the Indian situation, where rural wages
are low and there is hidden and seasonal unemployment, employment
guarantee schemes contributes in a significant way to social security.
However, the benefits from the programmes for souci-economic, poverty-
alleviation, provision of basic needs and social security cannot accrue to the
rural poor in full measure unless they are organized and become conscious of
their rights. Right to work should be incorporated as a fundamental right.

But most evaluations of these programmes, whether done by the government

or others, agree that these programmes have not been very effective in
reducing poverty, as these suffer from ill-defined multiple objectives, limited
targeting towards the poor, under-funding and often complex administration,
high administrative costs and leakage, lack of proper accountability and
adequate monitoring. For example, a recent study of the Public Distribution
System (PDS) suggested that as little as 25 per cent of the foodgrains
actually reach the poorest 40 per cent of the population and that
administrative costs far outweigh the income gains to the poor. In general, it
costs the government between 2 and 7 rupees (with the highest value
reported for the PDS) to provide one rupee to the poor. One of the better-
targeted programs is the Integrated Child Development Services (ICDS).
Similarly, public works (popularly known as the foods for works
programme) have been relatively more successful at targeting the poor and
have improved significantly the living standards of a large number of poor at
a relatively low cost.

In 1998 budget, government proposed to unify the existing various poverty

alleviation and employment generation programmes under two broad
categories of Self Employment Schemes and Wage Employment Schemes.

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Funding and organisational patterns will also be rationalised to achieve
maximum beneficial impact of these programmes.

In recent years both the Central and State governments are redirecting their
priorities and allocating higher shares of the social sector budgets on primary
education, basic health care and women and child welfare. Such a
reorientation will yield high dividends to population policy, since many
studies have underlined the importance of female literacy in reducing total
fertility and crude birth rates. The reorientation of expenditure priorities in
favour of primary education and basic health will entail reduction of existing
subsidies to higher education and non-basic health facilities.

State administrations, institutions in civil society, including many

Panchayati Rajs are being strengthened to enhance the institutional capacity
to carry out the ongoing reforms. In this respect, large opportunities for
greater private sector involvement remain unexplored. The private sector
plays a vital role in the provision of selected aspects of health services
(accounting for nearly 80 per cent of overall health expenditures). There is a
wide scope for strengthening the public-private partnership in the delivery of
health care services. There is also a wider scope for more involvement of
India’s several thousand Non-Government Organisations (NGOs) for
implementation of many government schemes in social sectors.